A new report by the CFPB finds credit report errors go unfixed and ignored by major credit reporting bureaus.
Each year the Consumer Financial Protection Bureau (CFPB) puts out a report summarizing customer complaints it received on the three largest nationwide consumer reporting agencies (NCRAs) — Equifax, Experian, and TransUnion.
This year, the agency received such an overwhelming number of complaints that it felt the need to issue a separate report on why complaints were so much higher than before. After going through the filed complaints with a fine tooth comb, the CFPB has drawn some conclusions that we at Argyle wanted to explore further.
More than 700,000 consumers filed complaints to the CFPB in 2021
Per the report, "in 2020, the CFPB received more than 319,000 credit or consumer reporting complaints. That number was quickly surpassed in 2021 with the CFPB receiving more than 500,000 credit or consumer reporting complaints between January and September alone."
More than 200 million Americans have credit files, and lenders rely on this information to decide whether to approve loans and on what terms. 700,000 is only 0.35% of the people with a credit file, but keep in mind that these are just the people who filed a report.
“The volume of complaints received by the CFPB, while large, is a fraction of the volume of disputes submitted to furnishers and CRAs annually,” per the CFPB report. “Prior CFPB research estimated the NCRAs received millions of consumer contacts disputing the completeness or accuracy of information on their credit reports."
Making a correction to your credit report is easier said than done
Quickly ask your colleagues who have needed to make a correction on their credit report. Chances are good at least a couple people in your network will start in on what a headache the process was.
Many of us know we have a credit report, but don’t actively review it for errors, instead taking a peek when applying for something that will take your credit score into account. The problem is, if you wait to check in until you are waiting for approval, you might not be able to get a correction in time.
Consumers submit more complaints about inaccurate information on their credit and consumer reports than about any other problem to the CFPB. Consumers most frequently assert that the inaccurate information on their credit report belongs to someone else, and often describe being victims of identity theft. Despite spending a considerable amount of time, money, and energy on trying to correct inaccuracies, consumers report that the credit bureaus’ automated processes for correcting inaccuracies do not work or they do not get responses to their concerns.
“The CFPB’s analysis reveals that the NCRAs are closing these complaints faster and with fewer instances of relief,” per the report. “In 2021, the NCRAs reported relief in less than 2% of complaints down from nearly 25% complaints in 2019.”
The consequences of inaccurate reporting
Now more than ever before consumers are just living with the consequences of inaccurate reporting. Whether this is because a correction request has been denied, the perceived adjustment isn’t worth the hassle, or a consumer doesn’t know how to get started in making a correction.
Inaccurate data in any system leads to low confidence in the decisions being made.
As a business that includes a credit score in your decision making process, you might be overlooking a portion of the population who have inaccurate credit reports, but could in reality be ideal to lend to in practice.
Credit scores can be a good starting point, but there are other indicators that can support businesses in making informed credit decisions.
What Argyle is doing different
Argyle believes that traditional credit bureaus are just one piece of the financial system, and that modern lenders need to turn to modern solutions for credit decisioning.
Employment records are the bedrock of financial transactions in society – from small business loans to housing rentals to mortgages. Yet building credit history and accessing financial services remain huge obstacles for many of our country’s workers.
By only providing access to employment data with express consent, these consumers are in the loop about what data their credit providers are seeing. Any inaccuracies that might come up are corrected by the employer, rather than an outside agency — and both the employee and employer are invested in making the correction quickly.
Employment and payroll data can add a boost of confidence in your credit decisioning process, and even expand the network of consumers you can work with. If you’re ready to get started, sign up for a free corporate account, and give the sandbox a try.